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Yahoo and Maktoob: A marriage made online

CAIRO: When Stanford students Jerry Yang and David Filo created a single place to store useful websites in 1994, they had no idea it would turn into a global internet company that would change the way people communicate. And Yahoo was born. A few years down the line in Jordan, Samih Toukan and Hussam Khoury …

CAIRO: When Stanford students Jerry Yang and David Filo created a single place to store useful websites in 1994, they had no idea it would turn into a global internet company that would change the way people communicate.

And Yahoo was born.

A few years down the line in Jordan, Samih Toukan and Hussam Khoury launched an internet services company that soon gave birth to the largest Arabic web portal.

On Aug 25, 2009, the two companies announced an engagement that would see Yahoo acquire Maktoob; and this past week the two sealed the deal marking their business marriage with a reception hosted by the American Chamber of Commerce in Cairo. “We always said it was the Yahoo of the Middle East and Arab world, said Ahmed Nassef, Maktoob’s general manager and now vice president and managing director of Yahoo Middle East.

Although no official figure was announced, analysts say the deal is worth around $80 million.

Yahoo has 22 million users in the Arab world while Maktoob has 18 million, and the general consensus is that the two have formed a regional powerhouse that will invest in Arabic content, grow online advertising in the region, and cater to its “exploding online audience.

Around 40 million users demanding Arabic are expected to come online in a few years, said Nassef, who is Egyptian-American and seemed pleased with such a prominent homecoming.

Egypt tops the number of users: 6 million for Yahoo and 3 million for Maktoob.

The focus at the onset will be “getting Arabic content, and Egypt plays a central role in this, Nassef said.

Jerry Yang, Yahoo co-founder, welcomed Maktoob, saying, “We’re thrilled to be in the Middle East where we see vibrancy and potential.

He recalled that when the company first started, the web was new and “we didn’t know what it could be doing.

Thankfully, right off the bat they realized that it would be smart to change Yahoo’s original name; Jerry and David s Guide to the World Wide Web doesn’t quite have the same ring to it.

Looking local

“Localization is the future, bringing together content and community, said Yang, adding that “Yahoo and Maktoob offer the best of two worlds: local content on a global platform.

“We decided to double down in the Middle East, he said, and “Egypt is one of the key countries, leading in terms of content production.

There is a 20 percent penetration of online audience in Egypt, he said, and “the number is exploding. The country boosts an active blogging community comprised of young users.

“The real work of the internet is social engineering, Yang said.

Speaking more broadly, Yang said that the 1.6 billion people on the internet worldwide mainly operate in two modes. On a very personal level, what he called “my world, users are interested in what’s going on in their personal interests, work, etc. The second mode is when users want to know what’s happening in “the world at large.

In the Arab world, the number of internet users was just 3.2 million in 2000 and reached 50 million in 2009, a 25 percent penetration rate.

There are 320 million Arabic speakers, he said, with less than 1 percent of online content in that language.

Yahoo Mail and Messenger services will be available in Arabic in the next few months, with Yahoo Groups and Answers coming online in Arabic later.

Besides bringing online content to Arabic users, the deal, Yang said, is obviously a financial opportunity and one of the elements crucial to its success is educating the regional marketplace about online advertising, which is very much still in its infancy.

“The advertising market in the Arab world is estimated at $5.5 billion in 2009, and a very small percentage of that is used online, he said, but later said confidently that ad opportunity will grow.

While it may seem like an ambitious goal, Yang said international companies that already advertise through Yahoo will likely see the potential of bringing their ad dollars to the region.

Around $75 billion are spent in offline advertising in emerging markets, and more of that will come online, said Keith Nilsson, vice president of emerging markets for Yahoo.

There’s also room for growth in the e-commerce industry.

Going mobile

Mobility is crucial in today’s internet world, and as the adoption curve reaches 20 percent penetration, this is the tipping point which will see an acceleration in broadband and call for more development centered around content and tools.

“Most of the markets in developing countries are mobile first markets, Yang said.

Hand in hand with focusing on mobility comes facilitating access to a larger segment of the population. According to a World Bank report, Yang cited that for every 10 percent increase in penetration, there is a corresponding 1.3 percent increase in growth.

But first, the cost of access needs to come down along with the cost of developing applications and content, he said. One way to do this is by utilizing cloud computing and building more infrastructure in the clouds.

Cloud computing services provide online applications that are accessed from a web browser, while the software and data are stored on servers, bringing down the cost of building infrastructure.

“Cloud computing-based data centers are more efficient and mindful of the environment, he added.

Telecom companies today are creating the capacity that will allow for more efficient computing, Yang said, pointing out that Yahoo will look to partner with local telecom operators.

Common goals

Yahoo officials said that they are coming into the region with a vision of creating more jobs, engaging with local government, supporting education initiatives and encouraging entrepreneurship.

Nilsson said that supporting education entails providing access to internet, content and information.

Yang also cited that Yahoo will play a role in the digital convergence wave that is already seeing television and print media shifting their focus online.

For his part, Nassef said that the Arab world is home to the youngest population in the world – making up the core of internet and mobile penetration – which will be eager to engage with and develop the Yahoo-Maktoob platform.

“Talent is the most scarce resource, said Yang, but Yahoo will continue to focus on innovation and building up local cadres.

Asked how Yahoo will deal with local laws and possible censorship issues, Yang said, “We are fairly experienced at operating under different content laws and sensitivities.

Getting users IDs is a strict process, he said, and it “may or may not be something we can give to authorities.